TLDR
- Warren Buffett confirmed he personally initiated Berkshire Hathaway’s Alphabet investment, not CEO Greg Abel
- Berkshire has put over $27 billion into GOOGL, making it one of the firm’s largest holdings
- Buffett likes Alphabet’s ability to redeploy cash into high-return AI data center investments
- Alphabet generated roughly $150 billion in operating cash over the last 12 months
- GOOGL trades at $346.51, with some analysts flagging it as overvalued at 46.9% above its GF Value of $236.10
Warren Buffett has cleared up the speculation. He told CNBC he personally initiated Berkshire Hathaway’s investment in Alphabet — not incoming CEO Greg Abel.
Berkshire first bought around $4 billion of GOOGL last year. Since then, the position has grown to over $27 billion, making Alphabet one of Berkshire’s three largest holdings.
GOOGL currently trades at $346.51, up over 85% from its 52-week low of $187.05.
Buffett, who long avoided tech stocks, once said he would never buy Google. He even admitted at a recent CNBC interview: “I made a mistake,” referring to not buying earlier.
His longtime partner Charlie Munger had pushed back on Google for years, arguing it wasn’t a “real” cash business. That view has clearly changed.
What Changed Buffett’s Mind
Alphabet now generates roughly $150 billion in operating cash over the last 12 months. That’s the kind of number that gets Buffett’s attention.
But it’s not just the cash generation. Buffett said what makes a business truly great is its ability to redeploy that cash at high returns. Alphabet now has exactly that opportunity through AI infrastructure.
Management has guided for $180 billion to $190 billion in capital expenditures this year, almost all driven by AI data center demand. That would mark the first time in years Alphabet spends more than it generates.
Buffett believes Alphabet is better positioned than its competitors to earn strong returns on that spending. The reasoning centers on its full-stack cloud approach.
Why Buffett Backs Alphabet’s AI Bet
Alphabet doesn’t just rent out computing power. It offers a full platform — infrastructure, software tools, and its Gemini AI model family — that makes it stickier for developers.
It also designs its own chips, called TPUs. Alphabet recently signed a deal with Anthropic to supply those chips and plans to sell them to third-party customers. That gives it more control over costs and supply chains compared to rivals relying on Nvidia GPUs.
The backlog is also growing fast. At the end of Q1, Alphabet’s remaining performance obligations hit $462 billion — nearly double the prior quarter. Management expects more than 50% of that to convert to revenue within 24 months, which would push Google Cloud past $100 billion in annual revenue.
Despite the strong fundamentals, not everyone is bullish on the price. GuruFocus rates GOOGL as 46.9% overvalued against its GF Value of $236.10. The stock’s P/E of 26.45x sits above its five-year median of 24.35x.
Insider activity offers little comfort either — no insider buying in the past three months, with $4.2 million in insider selling.
Alphabet’s GF Score stands at 93 out of 100, with perfect 10/10 marks for profitability and growth, but a low 3/10 on valuation.
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